To
most people in the general public, the evaluation techniques that
loan officers use are an enigma. What compounds this situation is
that no one attempts to clear the mystery that shrouds the evaluation
of consumers. We want our customers to have better information so
that you may save yourselves more money.

Right
now, most pricing is risk based. Basically, that means the more
risky you are the higher the interest rate you'll be charged and
vice versa. The way to save interest when you borrow is to limit
the amount of perceived risk loan officers see when they look at
your credit bureau. How then exactly do loan officers look at your
credit report?

Loan
officers will use a scorecard that allows them to score potential
borrowers. Financial institutions do a great deal of work compiling
statistics on performance. As consumers, we can do ourselves a great
service by understanding the criteria. Discover
has an illustrative example scorecard below.

Reprinted
with permission, The Nilson Report, Oxnard, California

Look
at how much weight is put into "Credit Card References".
It is very important and is over 25% of your score. "Inquiries"
is an area that generates a lot of questions. An inquiry is when
you apply for credit and a financial institution asks a credit bureau
for your report. As you can see, if you apply for a rash of five
cards, you lose points.

As
college undergraduates, you have a real opportunity here to save
some money by doing some quick planning. Let's for one moment project
ourselves six months past graduation to a time when we are buying
a car. Let's look at our situation: we rent and have a fresh new
address (we look volatile to a loan officer) and we are brand new
at our jobs (lowest score possible). We can negate this effect by
"using our credit card as a tool"
to command a better interest rate loan. In the
next section, we'll show you how to "save thousands when you
borrow".

Learning
how a loan officer looks at you will save money. It also allows
for you to set some goals with how you want your credit report to
look like. The money you save will make you happy!